Pay Gaps Across Industries, Women Workforce In The UK And USA

Note: The focus of this paper is on trends in the UK, with supporting evidence from U.S. sources as the two countries have similar pay gaps across industries and similar participation rates of women in the workforce (Sudduth, 2018).

Earlier this year, the launch of the #PayMeToo campaign and the UK government’s new policies for corporate transparency stirred up hope for many who thought the gap was unbridgeable. The Guardian even reported that a “whiff of revolution” was in the air. Yet the winds of revolution seemed to blow shortly when 1,500 UK firms missed the deadline to report their gender pay gap (Thompson, 2018). With the difficulty in securing basic transparency with company’s labour data, the conversation regarding women’s work has become ever so imperative.

The hypothesis of equal work for 20% less pay begs the question of the value of women’s work, economically and socially. I propose that in this hypothetical world, a fully female workforce would be unlikely to happen for the reasons explored below. While the knee-jerk reaction may be to point to sexism, I seek to show that it is primarily about institutionalized biases which remain undetected by employees and employers.

The Lower Proportion of Women to Men Applying

While illegal for employers to discriminate against applicants based on immutable characteristics, job advertisements can still significantly influence applicants. A 2011 study analyzed how the wording in job descriptions could decrease interest for those jobs. Language matters, as women are often associated with communal words such as “interpersonal”, “supportive” and “understanding”, while men are associated more with agentic words such as “leader”, “competitive” and “dominant” (Eagly & Karau, 1991; Heilman, 1983; Rudman, Gaucher, Friesen, Kay & Kilianski, 2000.) The study’s results showed that those agentic words stereotypically associated with males were 27% more likely to appear in advertisements for male-dominated occupations (Gaucher and Friesen, 2011). The results from this were women experiencing a decrease in anticipated belongingness and interest for those already male-dominated fields, independent of their qualifications (Gaucher and Friesen, 2011).

The implications of the study are important because the results demonstrate how, even when the employers may actively be seeking more female candidates, unknowingly, the language they use to call for applicants may deter many qualified female candidates from applying or accepting the job. Therefore, although more profitable, a fully female workforce would not occur because of the varying proportions in the number of male to female applicants. This is especially true for traditionally male-dominated industries, where there may be an insufficient amount of female candidates willing to apply.

Subconscious Biases in Hiring

Even if there are many capable female candidates applying, the way that their applications are perceived may also impact their hireability. Randomized double-blind studies published by the Proceeding of National Academy of Sciences illustrate this, as the studies replicated conditions where women and men held equal qualifications. Handed identical applications with different gendered names, nearly all faculty participants rated the male applicant as significantly more competent and hireable than the identical female applicant and even offered higher starting salaries (Brescoll et al, 2012). This demonstrates how there is a gap between the actual qualifications of female candidates and the perception of them.

This phenomenon also applies in other sectors, where studies have shown that the perceived differences in competence are compounded by the status quo bias in hiring. As shown below, a 2016 study concluded that if there was only one woman in the finalist pool, there was no statistical chance of her being hired, regardless of qualifications, while the chances of hiring a woman were nearly 80 times greater if there were at least two women in the finalist pool (Stefanie K. Johnson, David R. Hekman & Elsa T. Chan, 2016).

This may be explained by the importance of proportions in social groups. When there are less women seen in similar positions or even applying (due to reason 1 above about gendered job descriptions), three perceptual phenomena occur: the few women who do apply deviate sharply from the norm (visibility), the difference between the male and female applicants are exaggerated (polarization), and applicants’ attributes are distorted to fit pre-existing generalizations about their gender (assimilation) (Kanter, 1977). These phenomenon may reinforce the status quo bias in hiring, with the status quo being determined by past hiring decisions and the demographics of those applying as well as those currently in the workforce (Samuelson and Zeckhauser, 1988). With highly male dominated work forces historically in the industry and high proportions of males applying, employers are unlikely to hire a fully female workforce.

Yet the question still persists. Wouldn’t employers be inclined to hire less men because the marginal gain of a better male worker would be outweighed by the enormous cost reduction in hiring cheaper female labour? After all, the businesses could also hire many more female workers to compensate. The final reason below explains that is unlikely to pan out because employers don’t have such a cut and dry calculus in hiring.

Informal Structures Enforcing Inequality in the Workplace

Employers don’t hire female employees assuming it is an economic bargain for equal labour. Not only is it illegal for employers to explicitly provide lower wages for female employees, but most don’t necessarily hire believing they would; the disparities accrue unknowingly through the interactions, or the lack thereof, in the workplace. Typically, promotions or pay raises are given to those thought to have most merit. However, employers arrive at that conclusion through a more informal judgement of their performance, often more based on visibility than raw output (McKinsey, 2016). When women report far fewer interactions with a senior leader than their male counterparts (51% compared to 62%), they are harmed more by this informal process (McKinsey, 2016). Furthermore, when leadership behaviour similarity contributes significantly to preferences for selection, any stereotypes around female leadership such as their perceived lack of agentic characteristics may discourage higher pay (Eagleson, Waldersee & Simmons, 2010). Therefore, because employers may be unaware of their tendency to pay women less, it is unlikely that their cost-benefit analysis always swings towards hiring solely female labour.

All the above explain partly why companies may work against their own bottom line in their hiring tacts. After all, companies where at least 15% of senior managers are female reported 50% higher profitability than those where female representation was below than 10%, yet there still hasn’t been a frantic rush to achieve that level of representation across the board (Morgan, 2018). Evidently then, even in a world with equal performance and unequal pay, the implicit biases present at every stage of a career would inevitably lead to men being hired.

However, the hypothetical world posed in the question is exactly that--hypothetical. Those subtle biases, though important, are still not the largest factor in the equation. To realize the true driver of wage disparity, we must first recognize that common statistics about the gender wage gap present an inaccurate picture, as they do not account for the variances among industries and across age groups of women.

The gender wage gap is itself a misnomer, as the disparity in wages is more attributable to what is often called a “motherhood penalty.” While women as a demographic are paid less than men, the wage gap is 7 cents at the beginning of their careers (Morin, 2013) and then widens significantly at the age of 27 which correlates with when many women start a family (Manchester City Council, 2017). This is because the job market is structured in a way so that the highest-paying jobs prefer employees who can work the longest, least flexible hours (Goldin, 2015). Whether it is client calls in the wake of the night or last minute work crunches after the 9-5 work day, this structure inevitably harms the economic prospects for caregivers, which are disproportionately women. When 74.1% of women in the UK have children and work, the impact falls on their shoulders, especially with inadequate access to childcare services (UK Office for National Statistics, 2015). That partly explains why jobs in the male-dominated and hour-heavy finance industry have the widest gaps in pay. For example, the British financial corporation Barclays recently reported a 43% gender wage gap in basic median pay and 79% difference in bonus pay (Kollewe & Barr, 2018). Senior positions and careers in industries which pay the most demand time are therefore less accessible for women who are more likely to work fewer than 40 hours per week (Goldin, 2015). Yet the issue also harms women who aren’t even mothers yet. A survey of 500 managers found that more than 40% admitted being wary of hiring a woman of childbearing age, a quarter preferred hiring a man in order to circumvent the issue of maternity leave and childcare and a third believed that women were not as competent at work after returning from maternity leave (Manchester City Council, 2017). This translates into less women being hired into high paying industries, or in the cases where they are hired, less opportunities upon coming back from maternity leave.

The policy implications from all of these findings are three-fold. First, it is imperative to eliminate smaller, yet still important contributors to the wage gap that are present in the hiring process. In addition to encouraging neutrality in job descriptions and job titles, blind hiring processes could also level the playing field. This has been shown to be successful in areas ranging from engineering careers to even professional orchestras. After switching to auditions which concealed the candidate’s identity for the jury, the probability of women advancing and being hired increased (Goldin and Rouse, 2000). Applying such a model to all industries could benefit both the candidates and also the employers themselves, who will be able to more impartially judge and hire based on qualifications. Second, the UK government should address the disparity between maternity and paternity leave, in order to alleviate the motherhood penalty. The UK’s policy of shared parental leave so far has unfortunately only fewer than 2% of fathers opt to take it in 2017, as families are reluctant to sacrifice the chief earnings in the household (Griffiths, 2018). To combat the gender wage gap, the UK government should target the gender gap in parental leave. A 12-week “use it or lose it” leave period should be implemented for fathers only, as per the recommendations of UK’s Women and Equalities Committee. Parental leave that is not dependent on mother’s eligibility to maternity leave would increase access to parental leave to more fathers and encourage a more equal distribution of caregiving among parents and supporting families which have socioeconomic barriers to childcare. For every month that fathers take off from work, mothers will experience a 7% increase in earnings (Johansson, 2010).

Yet these two solutions alone will not address the issue wholly. As Goldin, the director of the Development of the American Economy, stated, even with improved parental leave policies, “women are still perceived as being less serious and ambitious about their careers, and punished accordingly.” The final solution acknowledges this, which encourages more flexible work schedules that don’t adhere to rigid 9-to-5 corporate office hours. This would allow families to balance work and caregiving duties and also benefit employers. According to a Centre of Business and Economic Research study, 37% of working mums would increase the number of hours they worked each week, if they could work flexibly. Allowing working mothers and fathers to create work weeks that still provide the same value to employers but cater to their own families’ needs would be instrumental in combating the social and economic costs of motherhood.

All in all, a workplace without men will never occur because of the underlying issues with the hiring process and the structure for pay raises. With acknowledgement of the nuances across industries and age groups and the implementation of the three solutions, hopefully the whiff of a revolution becomes a full storm.